# Producer Behaviour and Supply-Cost (CBSE (Central Board of Secondary Education- Board Exam) Class-12 Economics): Questions 18 - 23 of 47

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## Question number: 18

Appeared in Year: 2010

Essay Question▾

### Describe in Detail

Given below is the cost schedule of a firm. Its average fixed cost is Rs. 20 when it produces 3 units.

 Output (units) 1 2 3 Average variable cost ( Rs. ) 30 28 32

Calculate its marginal cost and average total cost at each given level of output.

### Explanation

 Output (units) AVC AFC TFC (AFC Q) TVC (AVC Q) ATC (AVC +AFC) TC (TFC + TVC) 1 30 60 (60/1) 60 (60 1) 30 90 90 2 28 30= (60/2) 60 (30 2) 56 58 116 3 32 20 (60/3) 60 (20 3) 94 52 154

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## Question number: 19

Appeared in Year: 2012

Essay Question▾

### Describe in Detail

A producer invests his own savings in starting of a business and employs a manager to look after it. Identify implicit and explicit costs from this information. Explain.

### Explanation

Explicit Costs: paid directly in money - money costs. A firm incurs explicit costs when it pays for a factor of production at the same time it uses it.

• Explicit Cost = payments by a firm to purchase the service of productive resources (wages, interest, rent, capital)
• Implicit Costs: measured in units of money, but are not paid for directly in

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## Question number: 20

Appeared in Year: 2012

### Write in Short

What is the behavior of average fixed cost as output increase?

## Question number: 21

Essay Question▾

### Describe in Detail

Why does the difference between Average Total Cost and Average Variable Cost decrease as the output is increased? Can these two be equal at some level of output? Explain.

### Explanation

In this diagram output level increase and difference between Average Total Cost and Average Variable Cost goes on falling.

Average Total Cost (ATC) minus Average Variable Cost (AVC) is equal to Aver

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## Question number: 22

### Write in Short

Calculate Total Variable Cost and Marginal Cost from the following cost schedule of a firm whose Total Fixed Costs are Rs. 12

 Output Total Cost 1 20 2 26 3 31 4 38

## Question number: 23

Essay Question▾

### Describe in Detail

Distinguish between fixed cost and variable cost and give one example of each?

### Explanation

 Characteristics Fixed cost Variable cost Definition Fixed costs are costs that do not vary with the level of production. Variable costs are the costs that do vary with the level of production. When change in cost? Fixed costs are expenses which in total does not change in proportion to the activity of a business, within the relevant time period. Variable costs by contrast change in relation to the activity of a business such as sales or production volume.

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